The city of Powell started talking about a fiber network in 1996 but did not make progress for almost ten years. They developed a plan to build a FTTH network and lease it to an outside operator. The incumbents declined to partner with the City and later spent considerable effort to derail the City’s efforts. However, the City found a local cooperative, TriCounty Telephone (TCT), willing to offer triple-play services on the City’s network.

Financing the deal took more time than expected because the City was unwilling to commit public money directly or even as a backstop if the network fell behind on debt payments. While the City worked on the financing, cable incumbent Bresnan and telephone incumbent Qwest tried to convince the state legislature to abolish Powell’s authority in this arena. The legislature did create new obstacles for cities building such systems but Powell was grandfathered in.

In late 2007, the City agreed to an arrangement where TCT would exclusively lease the network and make up shortfalls in debt payments if required for a period of six years. After that period, the network would be open to other service providers as well and it would be the City’s responsibility to cover any shortfalls if needed. If the City chose not to appropriate in that situation, the investors could take the network. Estimates suggested a 33% take rate would allow the network to break even by the fifth year but most expected a higher take rate.

In early 2008, Powell completed the $6.5 million bond financing. As is more common in small builds, they immediately connected a line to the home rather than waiting for the subscriber to sign up. They trenched a fiber to the side of every house regardless of whether they were taking service, putting the fiber in a box on the side of the house. If the occupant signs up, a crew only has to install electronics rather than bringing a line down from the pole. This approach increases the capital cost slightly but can significantly decrease operating expenses as residents subscribe.

Powell, a small town 5,500 in Wyoming, has pursued a rather innovative strategy to ensure the community has world-class access to the Internet. In this article, Ernie Bray describes the model and how they put it together. In short, Powell was able to leverage its city-owned fiber optic ring to attract a partner that will help in rolling out a fiber-to-the-home network.

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I’m very familiar with many government owned telecom operations throughout the world, over many years, and across many different forms of government, and I can tell you that governments generally do not subsidize publicly owned telecommunications. They milk telecommunications - these systems generate a lot of revenue.